OneWall Communities Logo
OneWall Communities Icon

Nearly 1M Renters Priced Out of Home Ownership

The income a household needs to pay a mortgage rose to $62,872, up from $55,186 last year.

By Paul Bergeron


Many first-time buyers continue to struggle to move into homeownership amid sustained price growth and competition from all-cash buyers. The share of first-time buyers fell to 26% in November, according to the November REALTORS Confidence Index Survey.

This is the lowest level since January 2014, which was also 26%, and since NAR started tracking the share of first-time buyers on a monthly basis in October 2008.

NAR also found that nearly 1 million renter households got priced out of the market due to the price increase in 2021. During January-November 2021, the median existing-home sales price averaged $345,442, a 16.4% year-over-year increase from the median sales price of $296,700 in 2020.

At this price, the income a household needs to pay the mortgage affordably such that the monthly mortgage payment and interest payment don’t exceed 25% of income rose to $62,872, up from $55,186.

Based on the income distribution of renter households in 2020, NAR estimated that the number of renter households who can pay the mortgage affordably declined from 8.75 million to 7.71 million. This means 980,436 renter households got priced out of the market, assuming they can make a 10% down payment.

In 2020, first-time buyers made up 33% of existing home sale buyers, according to the RCI Survey. NAR’s 2021 Profile of Home Buyers and Sellers also reported an annual first-time buyer share of 34% among primary residence buyers only during July 2020-June 2021.

Competing With Other Buyers

A variety of factors influence the decision of first-time buyers to make a home purchase and to be successful in their offer. Affordability and ability to compete with other buyers are arguably important factors.

Under historically low mortgage rates and supply bottlenecks, demand has outpaced the supply of homes available on the market, resulting in double-digit price appreciation.

NAR’s latest November existing home sales data showed an uptick in the median existing home sales price to $353,900, a 13.9% year-over-year increase.

How the distribution of prices has shifted upward is indicated by the share of properties priced at up to $250,000. In 2012, properties priced at $250,000 or below made up 68% of the market. As of 2021, that share has been cut in half to just 30.8%.

Properties priced at over $1 million that made up less than 2% of the market in 2012 now account for 6%, or triple the share.

The share of cash buyers of sales that closed in November 2021 remained elevated at 24%.

Sellers tend to prefer cash buyers because buyer financing is assured, unlike in the case of mortgage financing which has the risk of the contract not closing if the property appraises for a lower value and the buyer cannot come up with the difference or the seller is not willing to bring down the price.